On July $1,$ Year $1,$ Khatri Industries Inc. issued $$18,000,000$ of $10-$year, $5\%$ bonds at a market $($effective$)$ interest rate of $6\%,$ receiving cash of $$16,661,102.$ Interest on the bonds is payable semiannually on December $31$ and June $30.$ The fiscal year of the company is the calendar year.

INSTRUCTIONS

Journalize the entry to record the amount of cash proceeds from the issuance of the bonds on July $1,$ Year $1.$

Journalize the entries to record the following:

a$.$ The first semiannual interest payment on December $31,$ Year $1,$ and the amortization of the bond discount, using the straight$-$line method. Round to the nearest dollar.

b$.$ The interest payment on June $30,$ Year $2,$ and the amortization of the bond discount, using the straight$-$line method. Round to the nearest dollar.

Determine the total interest expense for Year $1.$

Will the bond proceeds always be less than the face amount of the bonds when the contract rate is less than the market rate of interest?

$($Appendix $1)$ Compute the price of $$16,661,102$ received for the bonds by using the present value tables in Appendix A at the end of the text. Round to the nearest dollar.